Repsol and YPF: a perfect solution Case Solution And Analysis, HBR Case Study Solution & Analysis of Harvard Case Studies

Repsol and YPF: a perfect solution Case Study Solution

Introduction

YPF is an oil and Gas producing company which was established in Argentina. The company was first nationalized by the government. However, after the economic instability in the company, foreign investment in public company,in which YPF was also included, was offered. Repsol, interested in foreign investment, purchased 98%shares of YPF.

In 1999, the Repsol, which is a Spanish oil company, purchased 98% shares of YPF worth $15 billion. After acquisition, name of the company was changed to Repsol-YPF. This deal and acquisition of YPF was said to be the “perfect marriage”.

However, in 2002, it was announced that government is expropriating YPF as it is the sovereign power producing company of the state. Moreover, the political and economic condition of the country was being so worse that it was essential for the Government to take such steps in order to maintain public interest.

The step of seizing YPF’s shares has many political and economic risks that are related to the government’s decision. Moreover, the Repsol can also take legal steps against the government of Argentina that would be unfavorable for the situation that is going on in the country.

Analysis

The following analysis will help the company to identify the problems and the method for solving it. Moreover, the precautions that would be taken by the company in order to prevent I from any further alike situation

4i’s non environmental analysis

Non environmental forces consists of all the external factors. These factors lies outside the market in which the company exists. Repsol exists in oil and gas market. However, there are many external forces that have impact on the company. 4i’s analysis consists of issues, institution, interests and information. The analysis is shown below:

1. Issues:

The issues that have been face by the Repsol is that the government of Argentina has mad expropriation of oil and gas producing company in which Repsol had made 98% acquisition. Due to this expropriation, company has faced a financial loss which had a high impact on company’s reputation as well as market price and all over profitability.

2. Institutions:

Institutions that have been involved in this case are Government of Argentina, Repsol Company and its management and if the Repsol wanted to take any legal help, then the particular legal institutions will be the part of the case.However, these institutions have made up the situation and they are likely to make it better. Moreover, the Government of Spain and World federations, which are supporting Repsol Company can also be counted as the institutions.

3. Interests:

The interest of Government of Argentina is to take back the 51% share of the company for the public benefit. However, this benefit has a bad impact on country’s economic and political behavior and environment.

On the other side, the interest of Repsol Company is to get the justice and whatever compensation is calculated as the company has purchased 98% of shares of the company and it has cost its investment due to expropriation of YPF Company. This step has resulted in financial loss of the company.

4. Information:

The information of loss of $10.5 billion and 51% shares f the company has been faced by Repsol Company that held due to expropriation of the YPF Company. Therefore, this information should be framed and shown to the media so that no other company would make mistake to invest in Argentina and to make analysis and forecasting before investing into any company.

Question 1: was it a good idea for Repsol to enter Argentina in 1999 or should it has seen this coming?

Repsol entered into international market in 1999, in order to stream upwards. One of the international energy producing market contains Argentina, in which the company chose to buy 98% shares of YPF, which is said to be one of the most oil and gas producing company in the country/ however, after small period of time, Argentina faced bad economic situation with the currency crises. This inflation resulted in changing of political situation. The changing in economic and political situation caused the change in government. As a result, the new government announced to expropriate the YPF, which means the takeover of YPF for public interest.

However, Repsol should have done pre shares purchasing analysis of company and the country. That would inform the company to be sure about the country’s political and economic states that are going to change soon. Moreover, the Repsol should have entered country where there is a developed economy and are not facing any kinds of crises so that there would be secure and profitable investment.

The loss of Repsol investment in YPF can be recovered by filing law suit against Argentina. Moreover, the compensation money can also be demanded by the Government of Argentina that would help to cover the loss faced by Repsol in order to investing in Argentina private company...................

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